1. Field of the Invention
The present invention generally relates to a method for pricing services, such as professional services. More specifically, a capacity and value based pricing (CVBP) model systematically correlates “value” to the potential purchaser, along with several other attributes, into the price of professional services.
2. Description of the Related Art
The present invention was derived out of a need for a new way to think about how professional service “products” should be priced in a competitive marketplace. The price of any good or service should represent an aggregate of the value assigned to the various attributes of the product (for which there may be a rather large number). For services, in particular, there are several views on how this pricing decision should be undertaken.
Traditionally the pricing decision in professional services has fallen into the category of what is called “cost-plus” pricing. Cost-plus is the idea that service engagements are priced based on the costs incurred by the provider in supplying their services plus some pre-determined margin on these costs. While this is a feasible way to price service goods, it is not necessarily the most efficient way, with respect to overall profit, to approach the pricing problem.
In the face of this de facto pricing method companies have sought ways to more accurately price their products based on the value that is provided to the client. It is the assumption that if pricing is more closely correlated with value, then profit margins can be increased without having to increase staff or workload significantly.
It was in this vain that the present invention was developed. The present inventors realized that a need exists to systematically correlate “value”, along with other attributes, into the price of services, particularly professional services.